On the surface, all is quiet. Since the first week of April, the 10-year Treasury note has not traded above 2.05 percent or below 1.93 percent. It’s 1.95 percent this morning. Thrill-a-minute.

Low-fee mortgages have been 4 percent for three weeks (depending on down payment and credit). The Dow has had 100-point days, but is just yo-yo-ing below the 13,200 top.

In widely scattered patches of exuberance, innately good housing markets are turning — not bottoming, turning. Markets are turning in attractive places with scarce land, in-migration, and good economies (global, IT, government, health care). Looking back at their distress curves, the dead-drop in listings last year has resulted now in competing offers and modest increases in price. However, do not confuse these places with the rest.

New data are disquieting, but nothing scary. March orders for durable goods fell hard, down 4.2 percent even excluding volatile categories, and the multiyear chart shows gentle but unmistakable weakening.

New weekly claims for unemployment insurance have departed the 350,000 range for 385,000, but historically it’s a jagged chart, not necessarily marking trend-change.

Gross domestic product (GDP) in first-quarter 2012 arrived at 2.2 percent annualized versus the 2.5 to 3 percent forecast, but consumers came in on target, plus 2.9 percent. The one figure in the GDP report that hinted at sub-surface conditions: The Fed’s favorite inflation measure, the "personal consumption expenditure core deflator," jumped from 1.2 percent in Q4 2011 to 2.2 percent in the first 90 days this year. That’s "core," excluding the gasoline pop.

Enter the Fed’s post-meeting comments. Lost in misunderstanding Fed politics (the distracting regional-Fed country-hawk bird-brains), and in suspended hopes for QE3, and in a meaningless collection of long-range forecasts, and in guessing at what the Fed will do after 2014 … lost was this: "Inflation has picked up somewhat. …"

Then Federal Reserve Chairman Ben Bernanke was asked about new stimulus, including the Fed’s interest in inducing higher inflation, the darling proposal of Paul Krugman and his loyal propeller-heads. "That would be very reckless."

Thank you. As hammered at here last week, the Fed has neither the intention nor capacity to inflate away our debt burden. With personal consumption expenditures (PCE) above 2 percent, the Fed won’t even embark on something as mild as QE3.

Here in the U.S., a frozen Fed is not so bad. The greatest single strength of the U.S. economy is its adaptability, based on national acceptance of Schumpeter’s "creative destruction," no matter what pain it brings.

With the possible exception of German-hive collective adjustment, no other economy on Earth approaches U.S. tolerance for the pain of changing course. We do get on with it, and today’s improvements in labor, manufacturing, exports and housing — no matter how tepid — are testimony.

Elsewhere, disturbance on the surface understates the roiling trouble deep below.

Only 90 days ago, Frau Merkel seemed to have dragooned the rest of Europe into a new austerity treaty. This austerity has not even begun (Spain and Italy have already extended deadlines), but non-German economies have fallen out from under forecasts. Euro-zone PMI (just like ours, the descendent of the "purchasing managers’" survey) went negative in March at 49.1, deeper to 47.4 in April.

We used to refer to the European "periphery." Now it’s just Germany and non-Germany. Even the Dutch government collapsed last week under budget and recession pressure, and the next president of France will not be seen in Merkel’s lap. The non-Germans groveled last winter, desperate for German-allowed ECB bailouts. Now, like so many excessive borrowers who have discovered that they own the bank, Europe is refusing austerity and demanding growth measures.

However, welded to the euro while in desperate need to devalue, there are no growth measures available except for the European Central Bank to take on even more junk sovereign paper and/or reflate in the same manner Bernanke called "reckless." The ECB and the Bank of Japan are near the end of their supply of cans to kick, with one thing clear: Hope like hell that U.S. inflation subsides, so that the Fed can prevent a U.S. stall while worst comes to worst elsewhere.

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